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Contractor agrees to pay half-million dollars to settle False Claims Act allegations relating to unallowable costs on Army contract

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Integral Consulting Services, Inc. has agreed to pay the United States $505,838 to settle False Claims Act allegations that it submitted false claims to the government by inflating certain indirect cost rates in connection with work performed on a Department of the Army contract.

Integral Consulting Services, Inc. (ICS) is a Maryland-based company that provides IT solutions to federal government agencies and commercial organizations.  The services ICS provides range from biometric technologies to enterprise IT management and development of software applications.  In 2012, ICS was awarded an Army contract, W911W5-12-D-0002, under which it was required to provide the Army’s National Ground Intelligence Center’s Biometric Intelligence Program with identity intelligence analysis support.

The civil settlement agreement resolves allegations that from on or about May 1, 2012 through June 27, 2014, ICS took costs and expenses it and its employees incurred in connection with litigation arising out of a teaming agreement with another contracting company and included the costs and expenses in the General and Administration (G&A) indirect cost pool that was spread amongst ICS’s various government contracts, including Army Contract Number W911W5-12-D-0002, and submitted to the United States government.  The inclusion of such costs had the effect of inflating the claims paid by the Army to ICS.

The civil settlement resolves United States ex rel. Amit Dalal v. Integral Consulting Services, Inc., Civ. No. GJH-14-2529 (D. Md.), a lawsuit filed by a relator under the whistleblower provision of the False Claims Act.  The Act permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the recovery by the United States. As part of the civil resolution, the relator will receive approximately $92,315.

Source: https://www.justice.gov/usao-md/pr/defense-contractor-agrees-pay-over-half-million-dollars-settle-false-claims-act

 

“Reverse” False Claims Act liability extended to bonding companies

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On Monday, the U.S. District Court for the District of Columbia ruled that bonding companies can be held liable for treble damages under the False Claims Act for issuing surety bonds to construction companies that falsely claim to be a Service-Disabled Veteran-Owned Small Business (SDVOSB).

In a novel reverse False Claims Act case, whistleblower Andrew Scollick alleged that the bonding companies “knew or should have known” the construction companies were shell companies acting as a front for larger non-veteran owned entities violating the government’s contracting requirements.

A reverse false claim action can occur when defendants knowingly make a false statement in order to avoid having to pay the government when payment is otherwise due in violation of 31 U.S.C. § 3729(a)(1)(G) (reverse false claims).  See United States ex. rel. Scollick v. Narula, Case No: 14-cv-01339-RCL (District Court, District of Columbia. July 31, 2017).

Under the Miller Act, government construction contractors must post bid bonds, performance bonds, and payment bonds that guarantee that the contractor will perform the work according to the terms of the contract. In this case, the contract terms required that the construction be performed by a SDVOSB entity.  Michael Kohn, of Kohn, Kohn & Colapinto, who represents the whistleblower, argued that given their role in providing a surety bond to the contractor the bonding companies would know whether the invoicing being billed against the contract is being performed by a SDVOSB.  The district court agreed and found that a “reverse false claims” violation occurred because the bonding company knew or should have known that the construction organization was not a SDVOSB and the act of issuing surety bonds furthered the fraud.  As a result, the bonding companies were held legally obligated to return to the government funds the bonding company knew to be paid to contractor firms fraudulently posing as SDVOSBs. Being held liable under the False Claims Act means that treble damages will be awarded for every dollar up to the amount of the bond that the government paid out under each contract.

Because of the substantial dollar amounts involved, it is not all that uncommon for contractors to falsify service-disabled veteran status. Holding bonding companies liable when they have reason to know of the fraud could have an immense impact on stamping out such contract fraud. “Holding bonding companies liable for treble damages in these types of case will have a huge impact on preventing fraud in government contracts and will help ensure these contracts go to disabled veteran-owned companies as intended,” said Kohn.

The Scollick case alleges that two of the largest surety bonding companies, Hanover Insurance Company and Hudson Insurance Company, knowingly bonded dozens of Veteran Administration construction contracts totaling more than $12.5 million with the knowledge that the bonded contractors did not qualify as service-disabled, veteran-owned small businesses.

 

Source: http://www.webwire.com/ViewPressRel.asp?aId=211708

Construction company pays $5.4 million over disadvantaged business fraud claims

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DBE FraudA San Diego-based construction company has paid $5.4 million to resolve allegations that it fraudulently billed the federal government for work on multiple projects on military bases, including Camp Pendleton, the U.S. Attorney’s Office announced Wednesday.

It was alleged that Harper Construction Company Inc. knowingly used sham, small disadvantaged businesses and then falsely certified to the government that it used legitimate small disadvantaged businesses.

Harper Construction, a privately held general contractor, earns a substantial portion of its revenue through government contracting on construction projects across the country, prosecutors said.

The settlement involves four government contracts to construct facilities at Camp Pendleton and Camp Lejeune, North Carolina. The contracts required Harper to subcontract a certain percentage of work to small disadvantaged businesses.

Keep reading this article at: http://timesofsandiego.com/crime/2016/06/01/san-diego-construction-company-pays-5-4m-fraud-claims/

Read earlier report on this case at: http://gtpac.org/?p=7837

Tennessee construction company settles DBE fraud allegations for $2.25 million

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Mountain States Contractors, LLC, a subsidiary of Jones Brothers, has agreed to pay the United States more than $2,250,000 to settle False Claims Act (FCA) allegations, announced Jack Smith, Acting United States Attorney for the Middle District of Tennessee for the administration of this settlement.  The settlement resolves a civil investigation of Mountain States and affiliated companies for submitting false claims for payment to the government in connection with the U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) Program.

Jones BrothersUSDOT’s DBE Program provides a vehicle for increasing the participation by Minority Business Enterprises in state and local transportation projects and ensures that DBEs can compete fairly for federally funded transportation-related work.

The Justice Department alleged that Mountain States and its affiliated company, HMA, as the prime contractors on a federally-funded construction projects, agreed that they would use DBEs to perform subcontracted work on the projects.  For a number of these projects, Mountain States and HMA subcontracted with G&M Associates.  Although G&M Associates is a certified DBE, evidence obtained during the investigation indicated that Mountain States had improperly “loaned” its employees to G&M to perform the DBE work on the projects.  The entities claimed these employees as DBE employees for purposes of obtaining payment for their work despite the fact that the prime contractors continued to provide their health insurance.  The prime contractors also improperly leased equipment to G&M, which the entities then counted against the projects’ DBE goals.

“Fraud schemes like that committed by Mountain States harms the integrity of law abiding, small business contractors trying to compete for contracts on a level playing field,” said Marlies Gonzalez, regional Special Agent-in-Charge of the U.S. Department of Transportation Office of Inspector General.

The allegations resolved by today’s settlement were originally raised in a lawsuit filed against Mountain States by a former Mountain States employee who brought his claims under the qui tam, or whistleblower, provisions of the FCA, which allow private citizens with knowledge of false claims to bring civil suits on behalf of the government and to share in any recovery.  The whistleblower will receive over $405,000 as his share of the settlement.

In addition to the settlement, Mountain States will enter into a monitoring agreement with the Federal Highway Administration.  This agreement will help to prevent similar conduct in the future.

This matter was investigated by the DOT-Office of Inspector General and the United States Attorney’s Office for the Middle District of Tennessee.  The United States was represented by Assistant U.S. Attorney Christopher C. Sabis.

This case is docketed as United States ex rel. Meadows v. Mountain States Construction, LLC, No. 3:12-cv-0523 (M.D. Tenn.).

Source: https://www.justice.gov/usao-mdtn/pr/local-construction-company-settles-allegations-fraud-involving-disadvantaged-business-0

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